Insurers, attorneys spar over consumer law exemption

A little more than a year ago, says Linda Macia, a car making a U-turn in front of her 20-year-old daughter’s car led to an accident that forced her thigh bone to shatter her hip, as well as her dreams of interning in a laboratory that summer.

Today, Macia’s daughter’s hip and her career dreams are on the mend, but so far without any help from the other driver’s insurer, even though there is no dispute that the other driver was at fault, Macia said. The insurer, Peerless Insurance, backed out of a settlement at the last minute – citing complications relating to the family’s health insurance policy and forcing the family to sue for damages, Macia said. (Peerless declined comment because the matter is in litigation.)

Meanwhile, said Macia, her family is out so much money that it’s in danger of losing its Manchester home, and her daughter, limping her way through college, may not be able to afford a car to get to the internship this summer.

So even if Macia eventually wins, the family could lose, through the sheer delay involved, Marcia said.

“We are being punished even though we are innocent,” said Macia. “They (the insurance company) came up with a lame idea to keep the money.”

Macia would like to punish Peerless by suing it for triple damages under the state’s Consumer Protection Act for knowingly refusing to pay a legitimate claim, which is against the law. But insurance companies are exempt from the act. Instead, consumers must rely on the state Insurance Department to enforce the law.

Cases like Macia’s are the reason the state’s trial lawyers are strongly backing Senate Bill 188, which would end that exemption from acting in bad faith when settling an insurance claim.

“It gives consumer a remedy for unfair deceptive practices that may be listed in law now, but there is no practical way to enforce,” said Robert Hunt, a Gilford attorney for another client who had to go through five adjusters and two canceled mediations for more than a year before an insurance company told him to “go ahead and sue.”

Insurers, however, are just as heatedly opposing the bill, claiming that the measure would invite litigation and raise insurance rates. If the bill passes, along with a companion measure on contributory negligence, “it would be devastating to the insurance industry of this state. It’s a major power grab by the trial lawyers by this state. And not a pretty picture for the business community in this state,” said Bob Nash, president of Independent Insurance Agents and Brokers of New Hampshire.

SB 188 passed the Democratic Senate on a party-line vote on April 12, hardly noticed amid a flurry of legislation acted on before the “crossover” deadline, the last day a bill could be sent from the Senate to the House, and vice versa, and still become law this session.

The bill might have more ramifications than either its proponents or opponents expect. It was written mainly to enable consumers dealing with suits against third parties in car accidents – either the insurer of the driver that caused the accident or the insurer of the product that contributed to an injury – but the language appears to cover suits against a consumer’s own insurer as well as health insurance companies.

A matter of damages

Current law lists some 13 unfair trade practices, ranging from “knowingly misrepresenting … pertinent facts” to “failing to acknowledge and act promptly with request to claims.” The question is how to enforce the law.

Currently, that’s the Insurance Department’s job. After an investigation, the department can fine an insurance company $2,500 per violation and, on extreme cases, pull someone’s license. After the department reaches a determination, the injured party can sue but only collect what is due to him or her in the first place — actual damages.

Personal injury attorneys say that it isn’t worth taking these cases before the department, or even litigating them at all.

“It makes no business sense to take these cases,” said Cristina Rousseau, an attorney for the Van Dorn and Curtiss law firm in Orford. Rousseau pointed to the case of one of the firm’s clients — Monica Chaloux – whose car was rear-ended on Route 120 in Lebanon.

Although her vehicle was relatively undamaged compared to the front fender of the small car that hit her, she said that her neck – already sensitive due to prior surgery – bothered her enough to go to an emergency room and get help from a physical therapist.

The insurance company (which covered both parties) said that because the car was undamaged, the case was closed, sending her a $500 check that didn’t even cover her emergency room fees, even after being told that Chaloux was represented by an attorney.

“I don’t care about my vehicle,” said Chaloux. “What about me?”

The New Hampshire Trial Lawyers Association points to a CNN investigation entitled “Delay, Deny and Defend” that claims that such practices – challenging personal injury cases when there is little damage to the motor vehicle – are a new tactic spreading through the industry to save money on small claims. Insurance companies say such cases are often the result of fraud.

Attorneys would like to be able to enforce the fair trade provisions in the law by allowing consumers to sue, independent of any action by the Insurance Department.

The Consumer Protection Act allows consumers to collect triple damages, making smaller personal injury cases more attractive to attorneys, but a little less than a decade ago, the state exempted any business regulated by the Insurance Department, the Banking Department, the Bureau of Securities Regulation and the Public Utilities Commission from the law.

The Insurance Department says that most states at least exempt insurance companies from unfair trade practices litigation. And such lawsuits would get in the way of an Insurance Department attempt to remedy the situation, according to Deborah O’Loughlin, the agency’s legal coordinator. She also said it would increase litigation and raise insurance premiums — claims echoed by Nash.

The insurance industry is instead supporting House Bill 169, passed by the House Commerce Committee, which simply adds to the unfair trade practices list the practice of knowingly underestimating an insurance claim. But consumers would still be required to go to the Insurance Department first.

“This way a consumer may bring an action independent of any action taken by the department. It doesn’t matter whether someone is violating these provisions or not,” said Nash, arguing that the very threat of a suit will force settlements in fraudulent cases that could drive up the case of insurance. That is what happened in California after a similar law was approved.

“California repealed it, because premiums were going sky-high, and that is exactly what is going to happen here,” Nash said.

“We are talking about treble damages for minimal harm,” said George Roussos, lobbyist for the New Hampshire Association of Domestic Insurance Companies. “Who’s e going to pay for it? Not the insurance companies, but the people who buy insurance.”

But the trial lawyers association disputes the claim that there will be unnecessary litigation.

“Lawyers have nothing to gain by frivolously including a claim about bad faith,” said Jennifer Farrell, the association’s executive director. “Attorneys are subject to penalties, and we are also subject to the Consumer Protection Act.”

As for depending on the Insurance Department to work things out, Macia said, she tried contacting the agency on other matters and did not get much satisfaction.

“What does he do?” she said of Insurance Commissioner Roger Sevigny. “You file a complaint and you don’t hear from these people. What are they there for?”

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